The Direxion Daily Semiconductor Bull 3X ETF (NYSEArca: SOXL) has been riding high on the strength of the technology sector in the historic bull market run seen in U.S. equities, but is time for the bears to wrestle control from the bulls and thus, benefit the Direxion Daily Semiconductor Bear 3X ETF (NYSEArca: SOXS)?
Last week’s stock sell-off hit the technology sector and in turn, hurt semiconductors as well with the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) following the demise of U.S. equities that saw a 1,300 point loss in the Dow Jones Industrial Average in two consecutive days.
As such, SOXS overtook SOXL amid the rout in U.S. equities, but is this a sustainable run? Given the obstacles that the semiconductor industry is facing, particularly when the negative implications of trade wars between the United States and China could make its presence felt in the coming months, the reign of SOXS over SOXL could be sustainable.
Per an Investopedia article, “Chip stocks could punish complacent shareholders in the coming months, entering a bear market cycle that lasts several years and gives up the majority of gains posted since 2015. That decline could proceed despite continuing uptrends in other high-tech groups, confusing market players who don’t understand the semiconductor group’s perennial boom-bust cycles or its capacity to trade against broad benchmarks for months or years at a time.”